Bluebell Capital Partners has urged Glencore PLC (LSE:GLEN) to spin off its thermal coal business, divest non-core assets and improve its corporate governance, the Financial Times reported, citing a letter sent earlier this month by the hedge fund to the mining giant.
Thermal coal is burnt in power stations and generates about 40% of the world’s electricity. However, thermal coal is the world’s most polluting fossil fuel and miners in the western world have come under increasing pressure from investors and activists to cease production even as India and China’s reliance on imported thermal coal is expected to continue in the long term.
Glencore is the world’s biggest exporter of thermal coal. In July, it agreed to take control of the Cerrejón thermal coal mine in Colombia as rival FTSE-100 miners BHP Group PLC (LSE:BHP) and Anglo American PLC sold their share of the project as part of their thermal coal exit strategies. Glencore’s then chief executive Ivan Glasenberg criticised the companies: “Disposing of fossil fuel assets and making them someone else's issue is not the solution and it won't reduce absolute emissions.”
Bluebell, which previously took on Danone (OTCQX:DANOY) SA and GlaxoSmithKline PLC (LSE:GSK), asked Glencore to “chart a new future” without coal, the paper reported.
Bluebell advised Glencore’s recently appointed chairman Kalidas Madhavpeddi and new chief executive Gary Nagle that their company’s shares could rise 40%-45% over the medium term if they followed the hedge fund’s recommendations.
Last month, Barclays called Glencore their ‘top pick’ in the mining sector on the expectation that coal prices will remain high, while Citi described Glencore as the best performing large-cap in the year to date with thermal coal fuelling that performance.
READ: Barclays sees Glencore as ‘top pick’ as it expects coal prices to stay high
Glencore will host its annual investor seminar on Thursday when Nagle is expected to announce his plans for the company.